Investors' home purchases jump for the first time in two years

In this context, investors are defined as any institution or company that purchases residential real estate, according to Redfin. Investor purchases typically reflect buyers who purchase a home using an LLC, LLC, or other form of corporation or trust, and typically purchase the home to generate income or profit. Some intend to use the house as part-time residence or as a vacation home.

Investor share refers to the portion of homes purchased by investors during a given period, said Chen Zhao, chief economist at Redfin.

In the first quarter of 2024, the share of homes purchased by investors was 19%, according to Redfin.

“This means that about 81% of homes, by our measurements, are bought by people who are not investors, so they are most likely buying their homes to make it their primary residence,” Zhao said.

Institutional operators, or real estate investors who own at least 1,000 single-family homes, own about 1% of all U.S. housing stock, according to an analysis from research site ResiClub, based on data from Parcl Labs, a real estate data company. firm.

In a new report, Moody's Analytics looked at a metro-by-metro level at the relationship between investors' share of sales and homeownership rates, or the number of households that own their homes.

“There appears to be a very weak relationship between the two,” said Matthew Walsh, associate director and economist at Moody's Analytics.

In other words, he said there's not a lot of evidence of homebuyers being squeezed out of the market.

He added that based on the analysis, “these investors are not really capturing a significant portion of the housing stock and are preventing traditional single-family buyers from owning their homes.”

Investors bought existing homes at higher prices in some areas, Moody's found, in some cases accounting for as much as nearly a third of purchases. But even that doesn't necessarily indicate a crowding out of consumer homebuyers, Moody's analysts told CNBC.

Redfin's Zhao said it is almost impossible to measure the extent of the “crowding out” effect in the market.

“The answer to that question is really complicated. And it's not something you can do just by looking at fairly straightforward data,” Zhao said.

Part of the recent increase in real estate investor activity is due to seasonality, as more homes typically sell during the spring, Walsh said.

In addition, he said mortgage interest rates were at a lower level at the beginning of 2024 before rising in April.

In 2022, the housing market was at its peak, when home sales were high through the middle of the year, Walsh said. He said sales began to decline as mortgage rates rose, as higher interest rates affected typical homebuyers and investors.

If you're a consumer buying in the marketplace, you're competing with investors as well as other typical homebuyers, Chow explained.

“You have to think about what investors are doing with these homes, and that's where it gets more nuanced,” she said.

Many investors rent single-family homes. Although this may not be good for potential buyers, it is a “positive sign” for renters because it boosts the rental supply in the area, Chow said.

“People are looking for those larger rentals, and it's really important to get additional supply out there,” she said.

On the other hand, some investors are buying properties deemed uninhabitable, fixing them up and then adding them back to the housing supply — which is ultimately good for the housing market, she said.

“It's a very nuanced argument when you think about what investor activity means for the housing market,” Zhao said.